The Bank of England has reduced its benchmark interest rate to 4% amid fears of stagnating economic growth. Yet hopes for lower household expenses may be premature, as food prices are expected to rise steeply.
In a split decision, the MPC voted 5-4 in favor of the cut. It marks a continuation of the Bank’s loosening policy, but one now clouded by the threat of resurgent inflation.
Governor Bailey expressed caution, noting that economic indicators remain mixed. While borrowing costs are easing, wage hikes and global weather disruptions are pushing up basic goods prices.
The Bank predicts food inflation could soar to 5.5% by year-end. Cocoa and coffee harvests, packaging fees, and increased payroll costs are all contributing to a growing price burden.
Despite the government’s optimism, many economists argue that current fiscal strategies are worsening inflationary pressures. Some are calling for a rebalancing of tax and wage policies.
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